Gold prices have seen a muted performance this week, remaining within a tight trading range as anxiety persists over the prospect of higher U.S. interest rates for longer.
Spot gold (XAU/USD) was trading at $2,028.85 per ounce early Wednesday morning after facing some pressure as the dollar strengthened following New Zealand’s central bank’s decision to hold rates.
Investor focus has now shifted towards the imminent release of key U.S. economic data, particularly the PCE price index scheduled for Thursday. This data point, the Fed’s preferred gauge of inflation, is expected to show continued elevated inflation in January. If confirmed, it could further solidify the Fed’s stance on keeping interest rates higher for an extended period, potentially putting additional downward pressure on gold prices.
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Several Fed officials have also emphasised this week that persistent inflation remains a key obstacle to lowering interest rates in the first half of 2024.
While a second estimate of fourth-quarter GDP, due later today, may indicate some moderation in the U.S. economy, it is still projected to outperform other developed markets. This relative economic strength could provide the Fed with the leeway to maintain its tighter monetary policy for an extended period.
The repeated warnings from the Fed about delaying rate cuts and the strength of the U.S. dollar have been the primary factors limiting any significant upward movement in gold prices.
